Crescent Capital BDC, Inc.

remarks, there will be a question and answer session. At that time, if you would like to ask a question, press star 1 on your telephone keypad. If you would like to remove your question, press star 1 again. Please note that Crescent Capital BDC Inc. may be referred to as CCAP, Crescent BDC, or the company throughout the call. I'll start with some important reminders. Comments made over the course of this conference call and webcast may contain forward-looking statements and are subject to risks and uncertainties. The company's actual results could differ materially from those expressed in forward-looking statements for any reason, including those listed in its SEC filings. The company assumes no obligation for updating any search forward-looking statements. Please also note that past performance or market information is not a guarantee of future results. I'll now turn the call over to Dan McMahon.

Thank you. Yesterday after the market closed, the company issued its earnings press release for the third quarter ended September 30, 2025, and posted a presentation to the IR section of its website at www.crescentbdc.com. The presentation should be reviewed in conjunction with the company's Form 10-Q filed yesterday with the SEC. As a reminder, this call is being recorded for replay purposes. Speaking on today's call will be CCAP's Chief Executive Officer Jason Breaux, President Henry Chung, and Chief Financial Officer Gerhard Lombard. With that, I'd now like to turn it over to Jason.

Thank you, Dan. Hello, everyone, and thank you all for joining us. I'll start today's call by summarizing our third quarter results, follow that with some thoughts on the market, touch on our portfolio, and our forward earnings outlook. In terms of third quarter earnings, we reported net investment income of 46 cents per share, unchanged from the prior quarter, translating into an annualized NII yield of 9.5%. Earnings continue to remain in excess of our dividend, 110% base dividend coverage for the quarter. Net asset value was $19.28 per share as of September 30, compared to $19.55 per share as of June 30. The quarter over quarter decline was primarily due to unrealized and realized losses stemming from certain portfolio companies that have demonstrated weakened operating outlooks due to tariffs. Let me now discuss what we are seeing in our market and our positioning. With respect to the macroeconomic environment, the U.S. economy has largely remained resilient. While we have been seeing signs of some slowing momentum amid mixed labor and economic data, believe that the Federal Reserve's recent rate cuts, combined with greater clarity on tariff policies, may lead to near-term growth in LBL activity. On new investment opportunities, our private credit platform continues to maintain lead roles in the majority of our transactions. Given our focus on the core and lower middle markets, we believe we drive better structural protections and deals in the more competitive upper middle market, or BSL, replacement segments. Our segment focus provides us with the opportunity to lead our transactions and drive the documentation. We are focused on strong cash flow generation, tight EBITDA definitions, as well as enhanced monitoring rights, which allow us to be proactive versus reactive as we think about our approach to portfolio management. While we have no exposure to first brands and tricolor, These recent bankruptcies highlight governance issues that we seek to avoid by working with well-established private equity sponsors. We've established our private credit business by partnering closely with our longstanding sponsor relationships to uphold strong governance and oversight across our portfolio companies. Let's shift gears and discuss the investment portfolio. Please turn to slide 13 and 14. We ended the quarter with approximately $1.6 billion of investments at fair value across a highly diversified portfolio of 187 companies. An average investment size of approximately 0.6% of the total portfolio. Our top 10 largest borrowers represent 16% of the portfolio, as we are believers in modulating credit risk to position size. We have maintained an investment portfolio that consists primarily of first lien loans since inception, collectively representing 90% of the portfolio at fair value at quarter end. Additionally, we have positioned our portfolio to focus on domestic service-oriented businesses and, in our view, mitigate concentrated risks associated with tariffs, shifts in governance spending, and other policy changes. Finally, our investments are supported by well-capitalized private equity sponsors, with 99% of our debt portfolio in sponsor-backed companies as a quarter end. We have partnered with our sponsors to invest in well-capitalized borrowers with significant equity capital beneath us. And we note that the weighted average loan-to-value in the portfolio at time of underwrite is approximately 40%. Moving on to our dividend. For the fourth quarter, our board declared a regular dividend of $0.42 per share, which represents a 9% and 12% annualized dividend yield based on NAV and today's closing stock price, respectively. This dividend is payable on January 15, 2026 to stockholders of record as of December 31st. This marks our 39th consecutive quarter of earning our regular dividend at CCAP. Before I turn it over to Henry, I'd like to take a moment to discuss our outlook for CCAP's earning potential and base dividend in light of recent rate cuts and potential further easing in 2026. Looking ahead, we anticipate that a lower base rate environment may gradually reduce portfolio yields and place some pressure on net investment income, given the largely floating rate nature of direct lending portfolios. We believe several factors position CCAP well to address base rate driven earnings headwinds. To start, in the third quarter of 2025, our net investment income once again exceeded our base dividend, 110% coverage. On the liability side, approximately half of our borrowings are also floating rate, allowing funding costs to adjust downward to preserve our net interest margin. We have several additional levers that may help offset potential earnings pressure on lower base rates as the core future growth. First, we ended the quarter with net debt to equity of 1.20 times below the upper end of our 1.30 times target range. This provides us with flexibility to leverage Crescent's attractive origination pipeline and enhance earnings through prudent portfolio growth. Crescent's private credit platform has been active, with over $6 billion of capital committed to new and add-on investments on a trailing 12-month basis, including over $1.7 billion during the third quarter. Being associated with Crescent's private credit platform provides ample opportunity for CCAP to reinvest in attractive private credit investment opportunities. Second, a more accommodative rate environment should serve as a tailwind for new deal activity. Lower borrowing costs are expected to support renewed M&A and refinancing volumes. creating opportunities for attractive reinvestment and additional fee income. We are optimistic that over time, we may see higher levels of non-interest-related income as compared to this third quarter, driven by a pickup in origination and structuring fees on new investments, as well as accelerated amortizations on realizations. Third, our spillover income remains a meaningful source of earnings support. At approximately $1.10 per share, this balance provides a cushion as we navigate the current rate outlook. And finally, we have a demonstrated record of alignment with shareholders since inception. Each of our portfolio ramping initiatives, both when we established CCAP in 2015 and listed CCAP in 2020, were supported by our fee structure during the respective ramps. Additionally, we have committed substantial advisory support for accreted non-diluted growth opportunities, including our two public acquisitions. As I noted last quarter, our positioning has and always will be for the long term, and today we are comfortable with our dividend level. With that, I will now turn the call over to Henry. Henry. Thanks, Jason. Please turn to slide 15, where we highlight our recent activity. Gross deployment in the second quarter totaled $74 million, as you can see on the left-hand side of the page. During the quarter, we closed seven new platform investments, totaling $51 million. Even as spreads have tightened, our focus remains on high-quality companies with strong credit profiles. These new investments were loaned to private equity-backed companies with a weighted average spread of approximately 530 basis points. The remaining $22 million came from incremental investments in our existing portfolio companies. The $74 million in gross deployment compares to approximately $86 million in aggregate exits, sales, and repayments, resulting in net realizations of approximately $12 million for the third quarter. Our portfolio activity resulted in net realizations during the quarter due to several commitments to new portfolio companies that flipped into the fourth quarter. Turning back to the broader portfolio, please flip to slide 16. You can see that the weighted average yield of our income-producing securities at cost remained stable quarter over quarter at 10.4%. As of June 30th, 97% of our debt investments at fair value were floating rate with a weighted average floor of 77 basis points. The weighted average interest coverage of the companies in our investment portfolio at quarter end was stable at 2.1 times, demonstrating durability and strength within the earnings at our underlying portfolio companies. As a reminder, this calculation is based on the latest annualized base rates each quarter. Please flip to slide 17, which shows the trends in internal performance ratings. Overall, we have seen stability in the fundamental performance of our portfolio, resulting in consistency in our risk ratings and a weighted average portfolio risk rating of 2.1. On the right-hand side of the slide, you'll see that one- and two-rated investments representing names that are performing at or above our underwriting expectations increased modestly from 86% to 87% quarter over quarter, continuing to represent the lion's share of our portfolio at fair value. As a percentage of investments at fair value, non-accruals improved from 2.4% as of June 30th to 1.6% as of September 30th, driven by a change of control and recapitalization, as well as a sale of an investment that had previously been on non-accrual. This was partially offset by two new non-accrual investments during the quarter. The overall portfolio continues to demonstrate resilient business fundamentals, supported by the fact that the vast majority of our borrowers experience steady revenue and EBITDA growth year over year. We have seen weakness in certain watch list investments that are facing operating challenges resulting from tariff impacts. Two of these investments, one which exports goods to the U.S. from Europe, the other which sources a meaningful percentage of its inventory from overseas, negatively impacted NAV this quarter, collectively accounting for 15 cents per share and unrealized losses. As a reminder, in May, we highlighted that our initial tariff analysis identified 4% of our portfolio may face direct operating impact from tariff policies. We do not believe this exposure has increased in any meaningful way since our initial review, and outside of the select portfolio companies highlighted, the portfolio impact from tariffs remains muted. We continue to monitor closely for potential adverse impact in the portfolio stem income trade policy and believe our aggregate risk is manageable, particularly as the portfolio further diversifies. More broadly speaking, we have continued to take a preemptive and rigorous approach to our watch list recognizing that there are a variety of approaches to how managers think about these categorizations. It's worth noting that as of the end of the third quarter, as a percentage of total investments at fair value, DCAS watch list, which we define as three, four, and five rated investments, was 13% as compared to non-accruals of 1.6%, so a gap of over 11%. Based on an analysis of our public peers, this gap is approximately 5%. We do not wait until there's default for moving an investment down the risk rating scale. We strive to be transparent about the health of our portfolio with the market, and one of the ways we do so is by taking a preemptive approach towards how we classify our watch list investments. With that, I will now turn it over to Gerhard. Thanks, Henry, and hello, everyone. Yesterday evening, we reported net investment income of $0.46 per share, which is in line with the prior quarter. Net income for the first quarter was $0.19 per share, compared to $0.41 in the prior quarter. The quarter-over-quarter change primarily reflects higher net realized and unrealized losses. The tariffs impacted investments that Henry noted accounted for the majority of the change in realized and unrealized losses during the quarter. While these items impacted results this quarter, they represent isolated credit events within an otherwise stable and well-diversified portfolio. Turning to the balance sheet, as of September 30, 2025, our investment portfolio at fair value totaled $1.6 billion, consistent with the prior quarter. Total net assets were $714 million, and NAS per share was $19.28, a decrease from $19.55 at the end of the second quarter. Let's shift to our capitalization and liquidity. I'm on slide 19. In light of the continued tightening in credit spreads, we're actively pursuing opportunities to optimize the pricing, tenor, and diversification of our financing sources, leveraging more constructive dynamics in the private placement market. At the end of October, we priced $185 million of new senior unsecured notes, broken down into three tranches. First, $67.5 million due February 2029. Second, $67.5 million due February 2031, and a third $50 million due May 2029. The notes will be issued in two closings. The first and second tranches, totaling $135 million, will be issued in February 26, and the third tranche will be issued in May 2026. The proceeds from these respective issuances will be used to repay the majority of our existing unsecured debt maturing in 2026. Pro forma for this activity, over 90% total committed debt now matures in 2028 or later. So we're pleased with our progress here. The weighted average stated interest rates on our total borrowings was 5.99% as of quarter end, down from 6.09% in the prior quarter, due primarily to a 60 basis point spread reduction in our SPV asset facility, which we right-sized during the second quarter and discussed on last quarter's call. A quarter-end debt-to-equity ratio was 1.23 times or 1.20 times on a net basis, unchanged from the prior quarter and within a stated target range of 1.1 times to 1.3 times. With $240 million of undrawn capacity subject to leveraged borrowing base and other restrictions and $28 million of cash and cash equivalents as a quarter-end, We have sufficient liquidity to selectively fund further investment activity while maintaining a debt-to-equity ratio inside our target range. The third and final previously announced $0.05 per share special cash dividend related to undistributed taxable income was paid in September. As Jason noted, for the fourth quarter of 2025, our Board has declared our regular dividend of $0.42 per share. While our existing variable supplemental dividend framework remains in effect, CCAP will not pay a Q4 supplemental dividend as the measurement cap exceeded 50% of this quarter's excess available earnings. And with that, I'd like to turn it back to Jason for closing remarks. Thank you, Gerard. In closing, as we enter the last two months of the year and look towards 2026, we believe CCAP remains well-positioned with respect to our experienced investment teams. high-quality, diversified portfolio, and strong capital structure. We remain optimistic about the long-term prospects of the company, given our positioning as a leader in the core and lower middle market, with access to the breadth and resources of the broader Crescent platform. And we are focused on continuing to deliver a stable NAP profile and attractive total economic return in excess of the public BDC space. Thank you all for joining us today and your interest in CCAP. I'll now turn the call over to the operator for Q&A.